Rupee hits record low, Turkey woes hit emerging markets

The Sri Lankan rupee hit a record low yesterday, tracking weakness in emerging-market currencies as Turkey’s financial woes bruised investor risk appetite, dealers said.

Absence of dollar conversions by exporters and remittances also weighed on the market, they added.

The rupee fell to an all-time low of 160.30 per dollar, surpassing the previous record of 160.17 hit on June 17. It closed at 160.20/30, compared with Monday’s close of 160.10/25, and has declined 4.4 percent so far this year.

“This is due to the emergingmarket meltdown. When the Indian rupee is down over 8 percent, the market expects the local currency to fall further as India is our main trading partner,” a currency dealer said on condition of anonymity.

Exporters and remittance converters are holding onto their dollars as they expect the local currency to decline further, he said, adding that the downward pressure would stay as the central bank was also not intervening.

The Indian rupee hit a record low of 70.1 per dollar on Tuesday, as concerns about Turkey’s economic woes spreading to other emerging markets such as India persisted.

Indian markets were closed on Wednesday for a holiday.

Asian currencies weakened against the dollar yesterday with Indonesia’s rupiah touching a near three-year low and China’s yuan hovering around 15-month lows.

Sri Lanka’s Central Bank Governor, Indrajit Coomaraswamy, had told reporters early this month after holding key monetary policy rates steady that several emergingmarket currencies had declined more than the Lankan rupee, adding that “if we reduce rates that would put further pressure on the exchange rate.”

Sri Lanka earlier this month raised import duties on small hybrid cars by more than 50 percent to boost revenue and curb a sharp fall in the rupee.

Coomaraswamy had said the rupee’s decline was driven mainly by external factors.

Foreign investors sold government securities worth a net Rs.2.56 billion (US$16 million) in the week ended Aug. 8, bringing the outflow so far this year to Rs.39.1 billion, Central Bank data showed. is